Sprint, with about 55 million subscribers, is the third-largest mobile carrier behind AT&T and Verizon Wireless. Buying Sprint would allow Dish to offer video, high-speed Internet and voice service across the country in one package whether people are home or not. Currently, Dish offers video services but its satellite Internet service isn’t as fast as those from wired providers.

Sprint’s nationwide network would let Dish offer wireless Internet service that people can use in their homes as well as a mobile-video service that could beam live TV to phones. Dish says it could deliver Internet service wirelessly from Sprint cellphone towers to an antenna installed on a roof. This could be especially useful in rural areas.

In an interview with the Journal, Dish Chairman Charles Ergen said he believes live video could be transmitted more efficiently over a special band of airwaves that Dish controls, avoiding so-called data caps imposed by many Internet service providers.

What airwaves does Dish own?
Through the years, Dish has acquired the rights to a massive amount of airwaves that can be used to deliver data wirelessly, often referred to as spectrum. The Journal has reported that Dish spent about $3 billion assembling its spectrum portfolio, and after getting regulatory clearance for its use, some estimate its value to be as much as $12 billion.

Airwaves for wireless signals are controlled by the government, which sells licenses to telecommunications carriers and others. The airwaves themselves, though, are useless unless you have technology–i.e. a network–that can transport data. It’s like spending lots of money on a car but not having gas to power it.

Bloomberg News

Charles “Charlie” Ergen, chairman and co-founder of Dish Network

Why did Dish buy airwaves if it didn’t have a way to use them?

That’s been a question for years as Dish built its holdings. On the one hand, airwaves–like beachfront real estate–aren’t a bad investment. They are limited resources that are likely to increase in value over time. Nonetheless, it was long thought that Dish CEO Charlie Ergen may have larger plans, such as building a high-speed broadband network using wireless connections.

Dish’s traditional satellite business is able to deliver video, but not high-speed access to the Internet, putting Dish at a disadvantage against other pay-TV providers, like cable and telecom companies that can bundle their service together.

Would buying Sprint solve Dish’s problems?

Sprint certainly would give Dish a way to use its airwaves, but such a deal also would raise other issues.

Dish would have to assume a lot of debt to get the deal done, potentially leaving less money available to invest in the business and allowing competitors to take advantage of the company’s distracted state.

How does Dish’s bid for Sprint affect the Softbank deal?

If approved by Sprint, it would replace the Softbank deal — which involves Softbank spending $20 billion to acquire 70% of Sprint — but wouldn’t eliminate the Japanese carrier’s involvement altogether. Because Softbank already has invested in Sprint, it would stand to own about 5% of a combined Dish/Sprint.

Mr. Ergen said he would welcome Softbank and its owner, Masayoshi Son; however, Mr. Son doesn’t seem like the type of person who would want a minority position. Mr. Son has ambitions to build his company into one of the largest in the world. The Softbank deal, financed by more than $20 billion in loans, would leave Sprint as a public company and give it much-needed cash to invest more heavily in its wireless network to battle AT&T and Verizon.

A Dish-Sprint deal would also complicate Sprint’s bid to buy the rest of Clearwire, a wireless carrier with a little-used network. Sprint owns about half of Clearwire, which controls a large swath of spectrum used to transfer the growing volume of data traffic. Dish also is attracted to Clearwire’s airwaves and made an attempt to buy Clearwire earlier this year.

If Sprint decides to go with Dish instead of Softbank, will regulators get in the way?

Industry analysts tell the Journal that federal regulators would likely welcome a Dish-Sprint merger because they have historically let smaller market players consolidate in order to challenge the leaders. In this case, the leaders are AT&T and Verizon, which control much of the country’s most-valuable airwaves in the lower-frequency range.

Regulators have a lot to consider in the wireless industry. In addition to the the bid for Sprint Deutsche Telekom 's T-Mobile is buying MetroPCS; Verizon has talked about buying out its wireless partner Vodafone; and Dish reportedly has looked at T-Mobile.

Why so many deals now?

All these companies own a lot of spectrum–remember that beachfront real estate?–and there’s a land grab going on for it, especially as airwaves become more precious because they are increasingly delivering more and more wireless data.

What does this mean for consumers?

There will likely be fewer telecom companies for customers to choose from, but they will be better able to handle the demands of delivering wireless data.

The U.S. government seems to want four carriers to serve the nation’s wireless needs. Right now, though, there’s a difference between the haves and have-nots. Verizon Wireless and AT&T are the healthiest and biggest, while Sprint and T-Mobile are farther behind and trying to catch up.

Like so many things in life, be prepared to spend more money. The government hopes four healthy providers of wireless service will contain prices, even as people become more dependent on always staying connected. While price drops are possible, all these companies wouldn’t be fighting for airwaves if they didn’t see profits there.